First Republic Executing Well And Still Undervalued

There's little question that while banks are clearly benefiting from a combination of healthy loan demand and higher rates, the market is already pricing in the risk of a hard landing (recession) and a swift end to the good times. With First Republic (NYSE:FRC) previously taking a hit on uncertainties related to succession planning and continuing to perform well on a core basis, this fast-growing bank has once again emerged from the pack - solidly outperforming the broader bank sector and slightly outperforming the S&P 500 since my last update.

At this point I continue to like First Republic, but I can't say it's one of the cheaper names out there. There is a risk that First Republic's lower asset sensitivity will lead to underperformance relative to other Main Street banks, but then First Republic could be a way to play a scenario where the Fed is less aggressive on rates, particularly with its strong organic loan growth capabilities. I can't call First Republic my favorite name at this point, but I do see an argument for owning a bank that has a differentiated culture and growth profile at a comparatively reasonable valuation.

 

Click here to continue: 

First Republic Executing Well And Still Undervalued